1. EU Framework: Directive 93/13/EEC on Unfair Terms

Purpose: Article 3 - A term not individually negotiated is unfair if, contrary to good faith, it causes a significant imbalance to the detriment of consumer.

3 Key Tests for Financial Contracts:

1. Non-negotiated: All standard mortgage conditions are presumed non-negotiated.
2. Transparency Test - Art.4(2) and 5: Terms defining main subject matter and price are excluded from unfairness test only if they are drafted in plain, intelligible language. CJEU says in finance this means not only grammatical clarity but that average consumer can understand economic consequences.
3. Effect - Art.6(1): Unfair term shall not be binding on consumer, contract continues without it if it can. National court cannot revise it, only exclude it.

The Directive does not harmonize mortgages directly: "As regards mortgages, these are only affected by Directive 93/13/EEC on abusive clauses", but through that it controls them.

2. Spanish Transposition

Spain went beyond minimum:

• Ley 7/1998, de 13 de abril, sobre Condiciones Generales de la Contratación (LCGC): Implementation of Directive 93/13 - Arts.5-8 create control of incorporation.
• TRLGDCU - Real Decreto Legislativo 1/2007: Arts.80-91 contain black list of abusive clauses. Art.82 = general clause identical to Directive, Art.85-90 specific clauses: tying, lack of reciprocity, disproportionate guarantees, etc.
• Ley 5/2019 Reguladora de Contratos de Crédito Inmobiliario (LCCI): Reinforces transparency - notarial deed, FEIN, FiAE, mandatory 10-day reflection.

Spain broadened scope: National law has broadened the scope of unfairness assessment to contract terms relating to main subject matter and price - so even interest rate can be reviewed if not transparent.

Spanish System of Triple Control - created by Supreme Court STS 241/2013:

1. Control de Incorporación: Was clause accessible and signed?
2. Control de Transparencia: Enhanced transparency for financial contracts. Consumer must understand not only literal meaning but economic burden and how it works. Real understanding.
3. Control de Contenido / Abusividad: Does it create significant imbalance contrary to good faith?

If it fails 2, it automatically fails 3 in financial contracts.

3. Major Abusive Clauses in Financial Contracts + Case Laws

A. Cláusula Suelo (Floor Clause) - The Origin Case

Clause fixing minimum interest rate e.g. 3% even if Euribor is 0.5%.

• STS 241/2013, 9 May 2013: Supreme Court declared floor clauses unfair due to lack of transparency. But limited retroactive restitution to amounts paid after 9 May 2013.
• CJEU Joined Cases C-154/15, C-307/15, C-308/15 - Gutiérrez Naranjo (21 Dec 2016): The Court held that case law of Tribunal Supremo imposing temporal limitation on repayment of amounts wrongly paid on basis of floor clause was contrary to Article 6(1) of Directive. Consumers entitled to full repayment. The ECJ emphasized unfair clauses should not bind and any advantages gained should be fully restored.
• CJEU C-869/19 and C-600/19 - 17 May 2022: Even if consumer waived right to sue in a private agreement with bank after floor clause, waiver is not valid unless consumer was fully informed. Enables consumers to sue again.

Result: All Spanish banks forced to refund € billions, and banks had to eliminate floor clauses.

B. IRPH Index

IRPH is Spanish official mortgage index, more expensive than Euribor. Banks argued official index = government regulated = outside Directive.

• STS 669/2017, 14 Dec 2017: Supreme Court confirmed it was not possible to determine lack of transparency merely by reference to one or other official indexes nor therefore abuse according to Directive 93/13.
• CJEU C-125/18 - Gómez del Moral Guasch (3 March 2020) and C-655/20 (2021): CJEU said clauses referencing IRPH ARE within scope of Directive because national regulation did not oblige use of official benchmark. Must pass transparency test on case-by-case basis.
• Spanish Supreme Court 12 Nov 2020 and Oct 2020 series: Following CJEU, Supreme Court admitted lack of transparency because borrower was not informed of evolution of IRPH during preceding 2 years. However, Supreme Court also concluded IRPH clause was indeed not abusive. Position as of offering memorandums: mortgage loans indexed to IRPH are not abusive, even if lack transparency, and therefore valid. This conflict is still open, new CJEU referrals pending.

C. Other Classic Financial Abusive Clauses Declared Null by STS

1. Cláusula de Vencimiento Anticipado (Early Maturity): STS 705/2015 - Clause allowing bank to call full loan after 1 missed payment is abusive. Now LCCI requires 12 months / 3% for first half, 15 months / 7% second half.
2. Intereses de Demora Abusivos: STS 265/2015: Default interest > 2% over ordinary interest is abusive.
3. Cláusula de Gastos: STS 705/2015 and STS 101/2020, 167/2020: Imposing all mortgage creation expenses (notary, registry, AJD) on borrower is abusive. Now split per law.
4. Hipoteca Multidivisa (Foreign Currency Mortgage): CJEU C-186/16 Andriciuc + STS 2017: Japanese Yen loan. Lack of transparency if consumer not explained exchange risk. Abusive for lack of transparency.
5. Intereses Revolving / Usura: STS 149/2015: 24% TAE revolving credit is usury, null under 1908 Represión Usura Law.
6. Reverse Mortgage: STS July 2026: Supreme Court voided remuneration and capitalization clauses in reverse mortgages due to lack of transparency, requiring return of interest.

D. Foundational CJEU Procedural Doctrine: Aziz

CJEU C-415/11 - Mohamed Aziz v Caixa d'Estalvis de Catalunya (14 March 2013):
Aziz lost home due to unfair early maturity + default interest + unilateral quantification. Spanish mortgage enforcement procedure did not allow judge to assess unfairness. CJEU ruled Art.6 and 7 Directive requires national court must be able to control ex officio potentially abusive nature, even in summary enforcement proceedings. This forced Spain to reform LEC Art.695.

Principle: Judge must assess unfairness of its own motion, taking into account nature of goods/services, all circumstances at conclusion, and consequences under applicable national law.

4. Consequences Today

1. Nullity ex tunc: Clause deemed never written. No moderation by judge - Article 6(1) requires courts to exclude application of unfair term so it does not produce binding effects.
2. Full retroactivity: Bank must restore.
3. Contract survives: Rest of mortgage stays valid if it can survive without clause.
4. Burden of proof: Bank must prove transparency - provided pre-contractual information, simulations, warned about scenarios.